What to do with a mortgage after a divorce

Dear Dr. Don,
I am going through a divorce, and my current mortgage balance is
$102,000. The home is worth $250,000. I would need to buy him out
for $75,000. We have nine years left on the mortgage, although that
would change if I refinance
for $175,000.

Would I need to refinance, or would it be treated as a new home
purchase? Maybe I should sell it and move. Are there any negatives
from taking this route? I’m trying to decide on the best path from
here.

Thanks,— Eileen Elicits

Dear Eileen,
First, you aren’t alone. This is a common challenge where divorcing
spouses need to change homeownership. Some of them don’t have the
income and credit history to borrow on their own. That’s the
reality of the post-marriage world.

You would still have to pay closing costs on a refinance.

Your situation is a little different because of the equity you
have in the home. You won’t have to pay for private mortgage
insurance, or PMI, which will help keep costs down.

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Should you stay in the home? A house has a lot of
expenses besides a mortgage. Can you afford the property taxes,
homeowners insurance, and general upkeep and maintenance on the
house, as well as the mortgage payment? If not, you should look
into selling it.

Your decision isn’t likely to be financial only, but the
monetary aspects have to fall in place to be able to stay in your
current home. You don’t want to be house-rich and cash-poor as you
look to rebuild your life after the divorce.

I can’t answer all the questions for you, but you can. If the
financial challenges are met, make a list of the pros and cons of
staying versus finding a new home to determine what’s best for
you.

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